Forexpros – Copper futures regained strength on Tuesday, rising to a twelve-day high as risk sentiment improved ahead of a liquidity boosting operation by the European Central Bank, while increased demand prospects from top consumer China lent further support.
On the Comex division of the New York Mercantile Exchange, copper futures for May delivery traded at USD3.905 a pound during European morning trade, gaining 0.42%.
It earlier rose by as much as 0.65% to trade at USD3.914 a pound, the highest since February 10.
Copper’s gains came as the U.S. dollar weakened against most of its major counterparts, with the euro trading close to a three-month high against the greenback.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.26% to trade at 78.43.
Sentiment improved after German lawmakers approved a second Greek bailout on Monday, while markets shrugged off a decision by ratings agency Standard & Poor’s to cut Greece’s long term credit rating to ‘selective default’.
Appetite for riskier assets received an additional boost as investors looked ahead to Wednesday’s launch of the ECB’s second three-year long-term refinancing operation, after a similar liquidity injection in December eased pressure on peripheral euro zone bond markets.
Europe as a region is second in global demand for the industrial metal. Prices have tracked investor sentiment toward the euro zone’s debt crisis in recent months.
Meanwhile, the China Securities Journal reported earlier Tuesday that Beijing will allow Chinese banks to issue more loans to fund local governments’ land purchases and road construction.
The new policy was said to be part of policy easing designed to take the burden off governments struggling to meet debt payments
The industrial metal is sensitive to the economic outlook because of its widespread uses in construction and manufacturing.
Copper prices have rallied nearly 11% since the start of 2012, buoyed by hopes that Chinese demand would pick up after the Lunar New Year in late-January, but demand from the Asian country has remained slack, raising concern prices could retreat sharply.
Analysts at global financial service provider Standard Chartered said earlier that they believe Chinese demand is recovering but at “a very, very slow pace.”
The lender said in a report, “Chinese demand is going to improve in the weeks ahead on seasonal factors, but the recovery should be slow because some copper consumers, like home appliance makers, are dealing with huge stockpiles due to weak order books from both domestic and overseas markets.”
China is the world’s largest copper consumer, accounting for almost 40% of world consumption last year.
Elsewhere on the Comex, gold for April delivery eased up 0.1% to trade at USD1,776.55 a troy ounce, while silver for May delivery added 0.07% to trade at USD35.63 a troy ounce.
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